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There was no midnight hour deal to be had between the city of Stockton, California and its creditors, and it has earned the dubious distinction of becoming the largest city-based municipal bankruptcy filing in U.S. history.

Representatives for the city officially filed for Chapter 9 protection in federal court in the state capital, Sacramento, late Thursday. The deadline for negotiations between city lawmakers and creditors designed to avoid the largest city bankruptcy filing in U.S. history came and went earlier this week without a solution, as expected. Moreover, on a 6-1 vote similar to one the Stockton (CA) City Council gave to approve a measure three weeks ago to authorize its city manager prepare its Chapter 9 petition, the council passed its Pendency Plan, essentially a budget to provide for daily operations while the city is in bankruptcy. The biggest cuts will be to retired pensioners, namely their medical benefits.

“This is the most difficult and heart-wrenching decision that we have ever been faced with; we must take action to protect the health, safety and welfare of the entire city and begin the recovery process,” said Mayor Ann Johnston.

The city, which boasts a large number of retiree entitlements and the second-highest foreclosure rate among U.S. cities, and its creditors, not coincidentally including a public retirees union and Wells Fargo, had gone through extensive negotiations. The 2011 California law’s requiring such mediation before an official filing aimed at keeping struggling municipalities from hastily entering into a Chapter 9. There was hope the law’s mandated negotiations were close to yielding a positive result in Stockton, which could become a bellwether case, but talks fell apart.

Stockton is among many U.S. cities, including several in California, struggling to get out of crushing debt wrought by expensive union contacts and retiree entitlements as well as tax base shrinkage caused by the real estate collapse. NACM contributors like Bruce Nathan, Esq., of Lowenstein Sandler PC, have been saying for the better part of a year that a wave of Chapter 9 filings would not be a shock and that creditors owed substantial debts by struggling municipalities needed to start preparing for worst case scenarios: more Chapter 9 filings.

And finally, part two of an interview with second-year GSCFM student, Denise Moller, CBF, CICP. Moller was chosen by her classmates as the class of 2012's Best Student last night during the graduation ceremony, and will receive her award at next year's Credit Congress in Las Vegas.

I've said this to everybody, but it seems like the networking here is just as important as the educational sessions. What would you say the difference is between the networking atmosphere in the first year and the networking atmosphere in the second?

I think the first year you come here you really don't know what to expect. You meet people that are at all different levels in their career, and it's fortunate. I am not at the point at my career, say, where [current second-year GSCFM student and Immediate Past National NACM Chairman] Kathy Tomlin is, and it meant a lot to me to be able to look at someone that's further on in their career, and see what steps I could take in my career to reach my personal goals and my professional goals within the industry. So just speaking with her and other people, and the financial statements courses, were the highlight of this. Not that the others didn't serve a purpose, but if I had to say what was the most important for me I would have to say the networking and the financial statement classes.

Are you guys planning on staying in touch after graduation?

I do hope that through Credit Congresses we'll be able to meet up with people, and I know that over the course of the last year I emailed different people and texted different people, so I do hope that we'll be able to stay in contact.

I know that some people's companies are not as willing to send them to different things, and I for one am very fortunate to be able to participate in those, so I know I will see certain people. [Fellow second-year student] Julia Ungren, her company just acquired a company that's an hour away from me, and next week she's coming in for a meeting, so we're hoping to be able to get together, and hopefully we'll continue to do that.

Like I said, I'm not at the end of my career. I'm hoping to establish a network over the years because I feel that the things you pick up from other people are what make you a better person for your company, things that you might not necessarily learn on your own, but that you learn from experiences with others.

How long have you been doing credit?

I have been doing collections 26 years, but I have been doing credit for six, and I never really knew there was a huge difference just because this was my job responsibility and this is what they called it. Then when you get into other companies, what they're calling credit and collections are two different functions; there are the collection people and there are the credit people. I have worked for other companies that are much smaller compared to some of these others, and I never worked with companies where, you know, we're making these multi-milion dollar deals and we're getting these financials. I rarely, rarely see financials

So that has been one of the best things for me as far as NACM is concerned, being exposed to that so that I'm not so tunnel-visioned.

NACM thanks all of our first-year and second-year students for attending the Graduate School of Credit and Financial Managment (GSCFM) program! To learn more about how to apply for next year's program, click here.

The Credit Managers’ Index (CMI) for June shows little change after a disappointing June, according to statistics available in Thursday's eNews release and at www.nacm.org.

The most distressing trend in the latest CMI is that sales continue to sag, and the slowing pace of expansion does not bode well for the summer months. Concern exists in areas such as accounts place for collection. However, there has been no surge in bankruptcy activity. That is a good indication of the fact that most business has not yet fallen back to the miserable patterns of a year or so ago.

Positive news in the latest CMI can be found in dollar collections and the rise in amount of credit extended, according to CMI data.

The economy as a whole seems to have settled into a pattern that is not in crisis, but neither is it expanding at an acceptable pace. It has been opined that no news is good news. There is something to be said for a month of data that didn’t really change, especially when changes of late have been more negative than positive. The latest CMI report is nearly identical to the prior reading, and right now that is a cause for some optimism. Not that there weren’t variations in the details—those will be the trends assessed in the coming months.

(Note: Check for more on the June CMI in Thursday's eNews or in the headlines bar on the NACM homepage, www.nacm.org).

Today, Denise Moller, CBF, CICP discusses the additional effort she and her class put in over the course of the last year in preparation for their second year at GSCFM. This will be the first in a two-part interview with Moller, the remainder of which will run tomorrow.

I heard that your class met up and had regular study sessions between last year and this year.

We set up conference calls after we all got home from last year's session. We had everyone's contact information and we contacted all the members that were going to be taking the CCE. A handful of people in our class that had already taken the CCE, so we contacted them to see if anyone would be interested in forming a study group.

An interstate study group.

Right, so most of the people replied that they were interested, so what we did was we set up a monthly meeting, a call-in, and we took all the chapters from the book that they had given us and we divided among the members. A couple unfortunately had to fall out, so we had to re-assign some of the chapters, but what we'd do is call in every month, and go through the "Test Your Knowledge" questions and the review questions that were at the back of each of the different chapters on a monthly basis. Because there was 12 chapters and we had a year, we would basically do a chapter a month.

That sounds like you all put in a lot of extra work doing this. What made you keep up with it?

My motivation was that I felt if I didn't stay on task I would end up a month from coming here, saying "I have a lot of material to go through." Before we left last year I was speaking to several of the second-year students and said "if you had to do this all over again, what would you tell me? What would be important?" and every one of them responded "get the project done and stick with the study session and stick with getting through the material so that you aren't getting caught up with things at work and in your personal life and find that you're all of the sudden making your reservation to come here and you're not prepared."

Was there any other extracurricular preparation that you did between this year and last?

Aside from that, my group that I had [for the second-year students' final group project], we set up monthly meetings as well, so that we went through our project and just kind of kept progressing. We were all looking through the material and going through the material and just really felt that we had to stay with appointments like we did at work, because we didn't want to keep pushing the deadline off.

You said that when you were a first-year, you asked the second-years what they could tell you that they would do differently. If a first year were to ask you that today, what would you tell them?

I would say that it was a great tool and, you'd have to ask the other members of the group, but for myself it was a great tool by keeping those appointments because it made me stay on task. If we were going to have a call-in next week, I wasn't going to not know what the material was about, so I needed to be prepared for the call. In the end, it meant that I needed to be prepared for coming back and taking the exam.

Check in at NACM's blog tomorrow for the rest of Denise's interview. GSCFM concludes tonight with a graduation banquet for the second-year students.

First-year student Justin Blackford, CICP, of Builders FirstSource outside of Charlotte, NC discusses how his role has grown post-recession, and how he got to GSCFM.

How long have you been in your current position?

I've been with my company now for five years, but I've been in the industry for almost 10.

What do you handle on a day-to-day basis?

I manage the department, and that team has been pressed because of the economy, but we review accounts, existing or new, to increase and establish credit lines. We manage the collection function, dispute resolution with our customers, that sort of thing.

That sounds pretty broad.

Very broad. I also do financial analysis on not only our customers but our business, including sales, so it's definitely widened.

Is that expanded role sort of a recent phenomenon?

It's always been a credit management role, but based on my desire to be innovative and obviously, the economy, everybody's wearing one or two different hats that they weren't wearing before.

How'd you hear about this program?

We've got a strong NACM group, particularly in construction in Charlotte, so it's something I've been aware of for a while. Being new to the field and fairly young in my career, I can't think of a better opportunity than this to enhance my knowledge and learn from people, and network. I don't think there's a better opportunity out there for a credit manager.

I made this comment to another student the other day, but it seems like the socializing aspect of the program is just as important as the actual education.

Absolutely. This is a great networking opportunity. The group is small and for that reason it's a close group, and you learn a lot of different perspectives from people. Not everyone's in the same industry so you learn how they manage their operations and handle similar credit issues that transcend the differences.

Some of GSCFM's most valuable discussions take place beyond the confines of Dartmouth's classrooms, as noted below by Ed Walsh of Samuel, Son & Co., Limited in Mississauga, Ontario.

How long have you been doing credit?

Almost 20 years.

How'd you get started?

By accident.

It seems like everyone says that.

Yeah, it's the same thing you know? They need somebody and then you start working there.

It seems like the socializing here is as much of an aspect of the program as the actual education sessions.

Yeah, I think developing relationships is a big part of it and also with that, just the subtle conversations that you get the opportunity to have with people, you know, be it about dealing with problem employees, compensation issues around credit management.

How do these conversations come about?

You know you don't sit down and say “let's talk about this or let's talk about that” but as we're walking from class to lunch or sitting around the dinner table you get the opportunity to just pick people's brains about things that happen. Now it's not all business talk all the time, but you don't get that opportunity normally in a three hour class or something like that.

Can you think of one thing that you were able to bring home from one of these conversations?

Yeah I would say certainly about dealing with difficult employees and how others have dealt with them. It gives me a lot to think about and just how I will deal with a particular situation that I have going on, and so you're able to say “hey, what would you do in this situation” and you get a bunch of people's perspective on it coming from the same type of departments. It either validates or it gives you things you haven't thought of.

Mark Woolnough, CPA, O'Neal Steel Co., Inc. will be sitting for the CCE exam tomorrow morning with most of his other second-year grad school classmates. Here he talks about how GSCFM prepared him for the exam, and how his role in credit has changed.

How long have you been in credit?

I'm a director of credit and I haven't really added up the years but let's just say somewhere or another I've had 25 years of involvement in credit, and the last 7 years that's all I've been doing. I'm very much involved in setting policy and working with sales on the big picture, looking at our portfolio and making sure we're hitting the right milestones, and sort of setting the pace.

How is what you're doing now different from what you were doing, say, 10 years ago?

I think there's a heightened realization that what we do really can impact the business, whether it's from impacting cash flow, whether it's to minimize risk, to even how we can make sales and find the right customer. Also helping sales know what baggage customers bring with them so that they can price accordingly. We're not so much viewed as a hindrance anymore. We're moving more and more into that partnership relationship.

What do you enjoy most about what you do?

It's a lot of diversity, and the business situations are what makes up that diversity. You don't know what you're going to get hit with next, and you have to maintain a level of creativity because what worked yesterday might not work today.

Are there aspects of the grad school program that allow you to exercise that creativity?

I think the most creativity comes about when you're dealing with your peers in this setting. Not only are you asking the people who are instructing us, but you're asking your peers what they would do in this situation, and that's helpful.

A high tide doesn’t necessarily raise all ships. Perhaps the most drastic sovereign business example of this is South America.

Though Brazil has been one of the drivers of the world economy for a few years, Colombia is enjoying a resurgence and the benefits of a new free trade agreement with the United States, and countries like Chile are feeling a boost from strength in industries ranging from raw materials to wine production, while Argentina has become a proverbial whipping post. All was fully on display at the G20 Summit in Mexico.

Argentina took several shots this week, not the least of concern was over the Falkland Islands row with the UK. A number of nations including Spain, Germany and the UK have called for sanctions against Argentina for its perceived lack of adherence to economic and legal commitments. The U.S. Congress even drafted a Congressional Resolution asking for the nation’s removal from the G20 unless it starts meeting demands.

Meanwhile, in a move also pointed at Argentina, along with South Africa and Brazil, a majority of the G20 voted to extend a pact barring the establishment of new trade barriers through 2014. Argentina has been seen as one of the nations most prone to protectionist policies that, in theory, members of the G20 have vowed to avoid.

At the 2012 Credit Congress in Texas, NACM Economists Chris Kuehl, PhD noted that Argentina has fallen so far it’s now considered in similar low ilk comparable to nations like Venezuela and Ecuador.

First-year GSCFM student Eddie Olewnik of CertainTeed Corporation discusses how he got into credit, and eventually the graduate school program.

What moved you to enroll in the GSCFM program?

One of the things, personally and also for my company, is continuing development to make us more well-rounded and value-added employees to our company. My immediate boss who had been through it and highly recommended it, suggested this as a great way to improve my skills and to develop and be more valuable to our company

How long have you been in commercial credit?

I've been in credit 10 years.

How did you get into it?

I've been with CertainTeed 22 years and I went a roundabout way of getting into credit. I was actually hired as a graphic artist in the art department and then my computer skills allowed me to evolve and be migrated into our IT function and all the while I was going to school at night for finance and business management. Once I got that degree, there was an opening as a cash applications supervisor which I applied for and got into credit that way. It's kind of evolved from there.

I've heard similar stories before, but you're the first person I've met that jumped from graphic design to credit.

Yeah [laughs], but that just goes to show the continuing, evolving, developing process. It's really a prime example of that.

Was there anything in particular that you hoped to get out of the program? Either from an educational or a networking perspective?

I was going to say networking is definitely high on the list, especially those in the same industry that I'm in and there are plenty in this year's class, so I'm really happy about that.

How has the program been going so far?

One of the things is that being away from everything and away from distractions, even though you're not totally away from distractions because of technology, but it's the best way to focus, and it makes a better learning experience. I think the benefits outweigh the quote-unquote sacrifices of the personal, creature comforts.

We've still got a long way to go but it's been great. I've learned a lot since I've been here and I'm looking forward to continuing that and then over the course of the next year keeping in close contact with everyone in this class and being ready for next year.

The Federal Reserve, while tipping its cap to continued problems of high unemployment and European debt woes, overall was largely positive in its statement following its monetary policy meeting of the Federal Open Market Committee Wednesday. As such, the Fed reiterated its play to stay the course.

The FOMC said the economy continues to expand at a moderate pace, and it expects that to continue, even with elevated unemployment:

“The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate."

The Fed voted to keep the target for the federal funds rate at a range between 0% and 1/4%. It reiterated plans to keep rates at historicaly low levels "at least through late 2014."

Additionally, in pledging the ability to take further action should positive growth trends reverse, the Fed plans to continue its other efforts to put downward pressure on longer-term interest rates and foster “more accommodative” financial conditions:

“Specifically, the Committee intends to purchase Treasury securities with remaining maturities of six years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately three years or less…The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.”

NACM's Graduate School of Credit and Financial Management (GSCFM) is currently ongoing on the campus of Dartmouth College. NACM Staff Writer Jacob Barron, CICP is also in attendance, and will be posting interviews with students throughout the program. Today's feature focuses on one second-year student's journey to grad school, and their relationship with their classmates.

What brought you to GSCFM in the first place?

Somebody within credit recommended that I come. They said that it was a good program, that it was a good thing to have the CCE, especially if you're looking to stay in credit. With [my company], they look at roles within finance as typically moving people in and out and giving people growth opportunities, but with credit being a more technical track, they really try to build you, but to build you within your own technical track.

One way to grow people is to give them other opportunities, but if you've decided that this is where you want to focus, then the only way to grow you is to give you extra exposure and different experiences within that.

Is there any one aspect of the GSCFM program that's been especially helpful for you?

I think the negotiation training will be, but from a networking perspective, and just working with people in a team...I'm sure you probably hear this from everybody that they have a really good class, but I think we have a really good class from the perspective of people working together on things. We had all 12 of us there studying [for the CCE] last night and [one class member] has been really good at just getting everybody together on a monthly basis to go through the stuff. So I think from a relationship standpoint it's been really helpful.

Do you stay in touch with your classmates throughout the year?

Yes, but most of it hasn't been from a work perspective. We've definitely kept together as a group from a studying perspective, to make sure that we're all on track.

What advice would you give to credit professionals considering the program?

I guess some people have to sell it, and in order to make that happen they need to understand the value of it, which I didn't have until I came here last year. When I started the program last year I did send an email out to a couple people I knew and say “this is a good program.”

Stay tuned for more interviews throughout this week and next. To learn more about NACM's GSCFM program, click here.

More than 30 students arrived on the campus of Dartmouth College yesterday for the 71st edition of NACM's Graduate School of Credit and Financial Management (GSCFM). A welcome banquet was held last night, as first-year students got to meet their colleagues and second-year students reunited with their classmates, and the comprehensive educational sessions began this morning.

This year's class includes an array of senior level professionals from different industries and backgrounds, each of them seeking an enhanced knowledge of commercial credit, along with an expanded professional network. Classes are taught by leading experts from industry and academia, and topics range from advanced negotiations to financial statement analysis.

GSCFM represents the peak of NACM's suite of educational opportunities. Stay tuned to NACM's blog all this week and next for updates and interviews with students.

The NACM National Trade Credit Report (NTCR) officially launched its Preffered Partner Program at Credit Congress last week in Grapevine, TX.

The Preferred Partner program is designed to help eliminate some perceived technical obstacles to using and sharing information with the NTCR initiative and its database. The partners will be working with interested NACM members and their clients to optimize the interface and ease information extraction and reporting for the report.

The founding members of the program are Billfire, CreditPointSoftware, Cforia, CMS (Credit Management Systems Inc.), Forseva and High Radius. Workflow A/R also is a valued partner of the program.

The NTCR illuminates elements such as credit scores, trade payment data and oft-requested “days beyond terms” statistics among tools drawn from a growing database fed by more than 10,000 businesses and 1,000 trade groups nationwide. The report website (http://www.tradecreditreport.com) is now live and designed to educate potential users by providing information on various aspects of what is included in the reports, viewable samples, downloadable brochures and links to help find NACM affiliates selling the NTCR, among other features.

The 2012 Credit Congress in Grapevine, TX went dark late last week. After nearly a week of educational sessions, networking and reunions, NACM closed up shop on the best-attended Credit Congress in five years...but not before the annual Closing Night Party.

Long a chance for credit professionals attending the conference to let their hair down after a busy few days, the delegates once again were treated to a high-energy concert of country originals and pop song covers by the LoCash Cowboys, whose appearance was sponsored by United TranzActions (UTA). Prior to the set, UTA's Dean Middleton once again gave out a couple of traditionally sought-after prizes to two randomly drawn members: a luxury Caribbean Cruise each, which were made possible by Talbott Travel (a division of NACM Tampa). Congrats to the winners: Robyn Lee and James Clem, CCE. Middleton would return to the stage as the center of attention when the Cowboys brought him up on stage for some backing vocals, dancing and a little comedy involving a Rolex and some dollar bills for a song.

Of course, organizers will try once again to raise the bar at the 2013 closing night party for Credit Congress, which will be held May 19-22 in Las Vegas.

International business and credit emerged as a key area of focus at the 2012 Credit Congress more than perhaps any year before. Among the growing popular track was a discussion lead by FCIB International Credit & Risk Management Online Course instructor Pam Thomas.

Thomas likened the credit policy to the foundation of a house, where the base needs to be strong. Developing a checklist of what the policy needs to address and identifying those key features – like the who, what and how much – are critical in creating that base strength. Being thorough and spending time defining what you are really looking to accomplish from the start are essential.

Thomas advocated a “customer first” mentality where sales and not rules should be the first priority. As the cornerstone of this philosophy, she promoted working more closely with the other departments around upcoming strategies and, thereby, be more informed about future business plans. She contended this helps to streamline the policy writing process. That said, flexibility to account for various factors, like political changes and corporate shifts, certainly need to be taken into account.

“It’s not like a t-shirt – one size doesn’t fit all,” maintained Thomas.

In recent years, surrounded by a sea of sovereign and business sob stories about how poor economic conditions were, there was one beacon of hope and grows: the BRICs (Brazil, Russia, India, and China). But, as NACM Economist Chris Kuehl noted during his appearances this week at Credit Congress, things have changed – and not for the better – in the BRICS and that, even if the economic bloc is better off than most, it can't be assumed that are protected from problems. His observations include the following:

Brazil – The leadership of the nation, still in its first year in power, is not proving as business friendly and/or savvy at its predecessors. Preparations for the Olympics and World Cup hosting this decade, once thought to be a sure-fire money generator to put them on the map as an elite economy, now foreshadows the potential to be a money-suck. And, like in the past, it seems to be having problems keeping inflationary pressure threats under wraps.

Russia – Things haven't changed – and that's the problem. The international optimism that conditions would become more transparent and less corrupt in government,business and banking simply haven't come to fruition as Vladimir Putin has taken control again (though some would argue he never really was out of power in anything more than title).

India – India is starting to have significant problems with inflation. Additionally, its position as an outsourcing destination positioned it in a favorable place in recent years. However, demands for better salaries and the desire for people to move into a middle class mean Asian neighbors are not cutting into that source of international business power.

China – It seems laughable to call 7% or 8% growth a problem. But, given the size of the population, China needs to add milllions upon millions of jobs every year to keep up with the population needs. Additionally, unrest seems to be building as workers there are starting to want better compensation and are making noise about it as the nation continues to move into a balance between a dictatorship-style government and capitalism. Potential for inflation also looms large.

Again, the BRICs remain better off than most -- but the days when the four nations can be counted on to virtually carry the global economy may be be in the rearview mirror.

At a Credit Congress session on “Doing Business in Mexico”, presenter Romelio Hernandez, of HMH Legal, stressed just how critical it is to ensure proper documentation when doing business in the fast-emerging Mexico.

“Forget about witnesses, documentary evidence is key,” Hernandez divulged. Whereas only a very small percentage of cases go to court in the United States, more 90% of Mexican legal actions end up in the court system, creating a bottleneck that results in lengthy judgments. Moreover, each jurisdiction in Mexico has its own issues, so he advised to investigate the area/region where your customers are. He also advocated for notaries when having documentation signed so as to diminish the chance that your terms and conditions cannot be contested. As a notary must also be an attorney, they “act as advisors to a certain extent.”

Hernandez noted that all security devices require a lot of formality – such as being signed by notary and the necessity to be filed in public registry – which scares away a lot of customers. And, although a security device will guarantee a quicker proceeding, he warns, “never fax a pagare (promissory note).”

He did, however not that purchase orders could be sent by fax, pending on the situation, as it was easier to prove consent in court, and that terms and conditions must also prove consent.

-Darren Rudham, FCIB/NACM staff contributor

(Note: You can see Hernandez’s recent Executive Development Series Doing Business in Mexico webinar in the Education On Demand section on the FCIB website, www.fcibglobal.com).

In one of the most anticipated Credit Congress sessions in years, renowned New York University Professor Ed Altman, PhD, noted that his interest in sovereign activity has been percolating in recent years, especially with the struggles happening in Europe. Altman, who invented the vaunted Z-Score bankruptcy/insolvency predictive metrics system, noted that with Greece a virtual lock to default and with Spain getting more likely to do so by the day, it might eventually be the performance of Italy that decides whether on not the European Union's common currency can withstand crisis and continue on.

“The bottom line on Europe is that the hero or villain is going to be Italy,” Altman, the Max L. Heine Professor of Finance at the NYU Stern School of Business and director of research in credit and debt markets at the NYU Salomon Center for the Study of Financial Institutions, told a large educational breakout session Wednesday. “Spain may be is too big to fail, but Italy is too big to save.”

Among things Italy has in the positive or hero side is the new government that Altman characterizes as “more enlightened.“ And, unlike its Spanish counterpart, Italy has exportable, brand-name products and services to help the economy grow as opposed to relying on things like tourism and internal real estate. Working against it is that Italy has third largest sovereign debt (2 trillion euro) in the world. Additionally, it has traditions – and not particularly productive ones – from a business standpoint that are hard to break. And, now, the interest rate on 10-year bonds is above 6%, which is thought by many to be unsustainable.

Altman predicted the chances are of Italy making it through and being the euro hero are about 50-50. Unfortunately, his take on that topic was a 70-30 probability just one year ago. The potential carryover damage, primarily coming from Spain's banking sector, has moved the needle in a negative direction.

“They now have a better government and seem to know what they need to do,” said Altman, who recently launched a Z-Score-Plus Smart Phone app which now includes predictive measures for public European Union companies. “The question is whether they have the will to do it.”

-Brian Shappell, CBA, NACM staff writer

(Note: Altman's Z-Score-Plus smart phone app is available to NACM members and Credit Congress attendees at a discount).

Eventually, all business will be e-business, but transitioning over from the world of hard-copy invoicing into an electronic equivalent isn't always easy.

Credit professionals attending NACM's ongoing Credit Congress received a wealth of information on how to smooth out the wrinkles in this process during “Electronic Bill Presentment and Payment,” held this morning. Organized as a panel discussion led by United TranzActions' own Rudet Fountain, the presentation found that attitude went a long way toward getting one's customers to make the leap to e-billing.

“I personally believe that your success moving customers from a manual process to an electronic process depends a whole lot on whether or not you think they'll do it,” said Fountain. “If you do, they will. If you don't, they won't,” he added, offering a story about one particular credit professional who realized that the thing preventing their customers from transitioning to e-billing was her. “[They] told me that they needed to get out of the way,” said Fountain, adding that the particular professional really committed to the process and eventually took steps to “remove the hurdles” for their customers.

On the other hand, credit professionals looking to convince their own company to make the switch to an electronic billing environment often needed hard numbers in order to do so. “That is a critical first step in this process: how much are you paying today?” asked panelist Tom Sacher, CCE. “You want to be able to show hard costs savings.”

Although this idea is intuitive, having the hard numbers just greases the wheels, Sacher noted. “I think we all instinctively know that if we delivered all of our invoices electronically instead of manually there would be some savings,” he added. “It makes it much easier when you have those hard costs in front of you.”

Credit Congress continues for the remainder of today. Look for further coverage here on the NACM blog, LinkedIn and Twitter feed.

The long-rumored bailout of Spanish banks to a tune of upwards of 100 billion euro is coming into better focus as the debt-hobbled nation will not have to start repaying until 2017 and will have to finish repayment without a decade thereafter. Still, NACM Economist Chris Kuehl argued during some of his 2012 Credit Congress appearances this week that the impact and even specific point of the bailout (other than to ensure the banks don't fail en mass) are yet unclear.

“It's a good plan generally, but the big conversation is what the emphasis will be,” Kuehl said. “Will it be about getting banks health or will it be about getting them active in the Spanish economy again. They are different things.”

What troubles Kuehl is that some of Spain's long-term strategies to reduce the strain on shrinking resources could leave the country without its brightest sons and daughters a decade or two down the road, which could threaten future growth/financial health. To wit, a grant program sponsored by the Spanish government in essence encourages nationals to seek jobs in other countries and, if they take the grant money aiming to help them relocate, they aren't allowed to return as a full-time resident for eight years.

“Who leaves? The young and the educated leave,” said Kuehl. “A semi-employed, 50-year-old is tied to family our community. So, you're sending the best and brightest away. And they're not going to come back after eight years.”

Kuehl added that such efforts, scattered and vague as they may be, are more likely to become the rule in Europe, rather than the exception.

“Spain is a harbinger of things to come: a series of short-term rescues aimed at helping out until another, better solution emerges.”

It seems to go without saying that information is perhaps the best weapon a credit manager can have in ensuring payment in virtually any industry. It would also seem that most would take getting accurate and useful information would be treated as importantly. But often, it isn't even in situation where it screams out as a necessity (Re: legal documents and statutes).

During a Credit Congress session with Greg Powelson, director of the Mechanics Lien & Bond Service, and Karen Hart Esq., of Bell Nunnally, pounded home the need for credit professionals to not just do homework (a common theme at Credit Congress...see previous story), but to do it the right way.

Powelson noted that he is often approached by clients who e-mail him articles talking about laws and statute new or analysis they found on some random Internet site that are out of date or are simply not accurate, and maybe never were.

“There's a reason free stuff is free a lot of the time. There's no obligation to keep it up to date,” Powelson said.

Hart quipped that credit professionals need to be sure to go to reputable sources, such as Westlaw, or perhaps “pulling the books”/hard copy for the statutes.

“Laws are changing quickly; legislatures are active. Just because it is on the internet doesn't mean it's right,” Hart said. “It might be. But the minute you have a problem, it's going to cause you a lot of heartburn.” In short, it's worth doing things right early in a process, even if that means having an attorney looking at a contract in many instances, whether a one-off or a standard document.

A three-person Executive Exchange panel that served as the first internationally focused offering of the 2012 Credit Congress may have drawn from diverse industries, but the theme of “do your homework… and a lot of it” emerged as a key take-away.

Larry O’Brien, CCE, ICCE; Gary Gaudette, CCE, ICCE; and Karen Hart, Esq. each agreed that managing the details on the front-end streamlines virtually everything thereafter. Hart particularly stressed the necessity to sign contracts early “before it gets hazy down the road.” She later added that “good customers can turn bad,” and it can happen in a hurry. So, in short, credit professionals should always know where to look for the customer's assets. O’ Brien and Guadette gave significant focus to the importance of staying on top of customers when requesting current financials.

“Push the guy on the other side because you probably aren’t the only one looking for it,” O'Brien said. “Ask for interim statements. Be persistent with them. Let them know that you aren’t going to let it go.” said O’Brien, who was named NACM Mentor of the Year during the June 11 Credit Congress General Session. Gaudette added the suggestion to “walk the line of being pushy with existing customers.”

But, it's not all about the financials and contracts, obviously. The panelists stressed the need to have conversations with customers and to go on international customer visits when possible. And, of course, do homework ahead of time, because knowing a strong amount of the details ahead of times can prove valuable in many ways.

“[Review] financials and bank info first, then set up a battery of questions to educate yourself on the missing info,” said O'Brien. “I usually have an idea of the answer beforehand but I want to see how they answer it to gauge trustworthiness,” said O’ Brien.

NACM National Chairman Marshall Kahn, CCE, kicked off the second full day of the 2012 Credit Congress with news that NACM enjoyed its second consecutive year of profitability after a couple of lean years during the deep U.S. and global recession.

Kahn noted that membership remains well above 15,000 at 2011's end, yet reiterated the importance for members with potential for national and board of directors to step up to become a board volunteer in the near future. And though speaking about the importance of Washington advocacy and calling your lawmakers on behalf of issues important to credit professionals, his sentiment about taking action drew parallels on other key issues for the association and profession, such as membership recruitment.

“Please don't assume that others will carry the burden of acting,” Kahn said. “Each of you plays such an important part through participation.”

Among those showing the way in that regard were affiliates MACM Midwest, NACM Upstate New York in Buffalo and NACM Wisconsin; and each of which received a 2012 membership award.

Kahn also invoked a long-standing theme at NACM: Strength in numbers. It's a theme speaker/author Garrison Wynn also drew upon during his presentation. The former comedian energetically delivered a speech about the need for credit managers to prove competence and trustworthiness in credit departments, all while peppering in a healthy dose of humor for the Credit Congress delegates. And, as he put it, trust is largely built on two things; compassion and competence.

And while teamwork and strength in numbers matters, Wynn also stressed to delegates the need to, as an individual, act naturally. Every winning team needs different personalities, even employees that could be labeled as negative (they might be the one that sees a problem in advance that some more optimistic employees might miss).

“The reality of things is we have to be honest about who we are...voice what you know,” Wynn said.

-Brian Shappell, CBA, NACM staff writer

(Note: Check back for more on-site coverage from 2012 Credit Congress throughout the week).

NACM's Credit Congress kicked off this morning with a rousing, inspirational presentation from Jamie Clarke, an author, motivational speaker and adventurer in the purest sense of the term.

Clarke noted that his roots as an adventurer started with his mother. “She gave me books, and around age 13-ish I accidentally start to read the books,” laughed Clarke. “I began to read the stories and in these adventurous tales they came home changed and I said 'I think I want to be an adventurer.'”

Eventually Clarke's accidental reading soon became a habit, and he stumbled into one goal in particular that became his focus. “So I grabbed the encyclopedia and learned what is mountaineering and I found this one mountain,” he noted.

That mountain, as one could guess, was Mount Everest.

While his goal was now clear, Clarke's actual journey was a bit more complicated. Years later, when it came time to actually make the trek to the top of the world's highest mountain, he faced a great deal of adversity. For example on his first attempt, “we failed in our attempt to reach the summit,” and then he tried “three years later and we didn't make it,” this time only coming about 160 meters shy of the summit. “It's a block and a half,” said Clarke.

Then in his third attempt, having never succumbed to fear of failure or loss of purpose, Clarke made it to the top of the mountain that had so fascinated him years before. “Fear is manifested in any kind of adventurer,” he noted. “Fear of judgment, all those things in our lives that we're concerned about, sometimes they create paralysis and prevent us from doing anything.”

“That intrigues me,” said Clarke. “Why is that fear there?” And it was at the top of Everest that he found that simply asking that question, and really considering it, makes it so that “it's no longer as scary as we thought. It was here that I learned how to manage that fear.”

In a way, fear became a flag, or a signifier for Clarke. “Fear is a companion, and fear also brings that energy,” he noted. “There's a little worry that maybe I won't measure up, and that fear is a good indicator that maybe you should give it a whirl.”

Now having ascended the famed Seven Summits, including Everest on multiple occasions, as well as becoming the first person since the middle of last century to cross the Arabian desert by camel, Clarke's endeavors served as a potent metaphor for attendees looking to ascend their own educational peaks, to the heights of continuing credit education. “On the other side of that fear is freedom,” he said. “Freedom to build the life we want

Stay tuned to NACM's blog for more updates from this year's ongoing NACM Credit Congress!

NACM's writing staff is on site at the Gaylord Texan in Grapevine, TX at the annual 2012 Credit Congress ready to provide updates and breaking news throughout next week. With attendance at its highest in five years, a buzz already is growing even with upwards of 90% of the delegates not arriving until Sunday.

And despite high attendance in 2012, there still is availability for credit professionals interested in registering for Credit Congress on site. For more information on Credit Congress, visit http://creditcongress.nacm.org/.

(Press Release) Standard & Poor's Ratings Services today said it affirmed its 'AA+' long-term and 'A-1+' short-term unsolicited sovereign credit ratings on the United States of America. The outlook on the long-term rating remains negative. The transfer and convertibility (T&C)assessment of the U.S. is 'AAA'. Our T&C assessment reflects the likelihood of official interference in the ability of U.S.-based public- and private-sector issuers to secure foreign exchange for debt service.

Our sovereign credit ratings on the U.S. primarily reflect our view of the strengths of the U.S. economy and monetary system, as well as the U.S. dollar's status as the world's key reserve currency. The ratings also take into account the high level of U.S. external debt net of liquid assets; our view of the recent decline--albeit from a high level--in the effectiveness, stability, and predictability of U.S. policymaking and political institutions; and the weakness of recent and expected U.S. fiscal performance.

We see the U.S. economy as highly diversified and market-oriented, with an adaptable and resilient economic structure, all of which contribute to strong credit quality...We view U.S. governmental institutions (including the [Obama] Administration and Congress) and policymaking as generally strong, although the ability to implement reforms has weakened in recent years because of a sometimes slow and complex decision-making process, particularly with regard to broad fiscal policy direction. In particular, we think that recent shifts in the ideologies of the two major political parties in the U.S. could raise uncertainties about the government's ability and willingness to sustain public finances consistently over the long term. We believe that political polarization has increased in recent years...

Although the 2012 elections could resolve the U.S. fiscal debate, we see this outcome as unlikely. If, as commentators currently expect, the election is close, the race could, in our view, reduce bipartisanship from its already low level as each side strives to rally support by more clearly distinguishing itself from the other.

As noted in this week’s eNews, among many media outlets, the European Union debt and financial crisis is teetering on spinning out of control. The Spanish banking struggles are the latest piece appearing close to a fall, and represents much more that the proverbial pawn, in comparison, that was the well-publicized Greek problems.

New York University Professor and 2012 Credit Congress speaker Ed Altman, PhD, told NACM this week that the entire mess could have limited, from a perspective of U.S. businesses, if credit departments had a few years ago not relied so heavily upon data from ratings agencies (Standard & Poor’s, Moody’s, Fitch) and it own interactions with a limited number customers in said countries.

“For a year and a half, I’ve been arguing the typical and traditional way to analyze the health of sovereign debt is incomplete, at best,” said Altman, the Max L. Heine Professor of Finance at the NYU Stern School of Business and director of research in credit and debt markets at the NYU Salomon Center for the Study of Financial Institutions. “It should be supplemented by a more in-depth analysis of the health of the private sector in each of the countries that are being analyzed.”

Altman, who developed the Z-Score bankruptcy predictor in 1968 and recently launched a Z-Score-Plus Smart Phone app, said running a check of public companies in the struggling European nations five years ago would have foretold some of the coming problems even as the sovereign ratings were good. Back then, Altman used the Z-score to determine that 13% of Greek companies were at least 50% likely to default. That number has spiked to upward of 25% in 2012. And fast-rising trend was also noticeable, but to a lesser extent in the rest of the “PIIGS nations:” Portugal and Italy both show that 25% of its public companies are at least 20% likely to default at present, not including financial institutions. Spain’s is much lower but, again, if factoring in financial institutions as well, no one save Greece is in worse shape than the Spanish, Altman suggested. All that gives credence to his outlook on the ratings agencies:

“Spain and Italy are still ‘A3’ from Moody’s and similar from S&P, but we all know these countries are no longer A-rating-worthy. I’m not saying you should ignore the macro factors most people look at, but you need to look at the micro factors closely as well.”

-Brian Shappell,CBA, NACM staff writer

(Note: Altman will be speaking at the 2012 Credit Congress in Grapevine (Greater Dallas), TX next week on the topic of corporate distress prediction. Registration is still available (on-site only) as are discounts for NACM members on the new Z-Score smart phone app. For more information on the upcoming Credit Congress, visit http://creditcongress.nacm.org/).

For the second straight month, there has been a decline in factory orders and the latest revisions for March showed an even steeper drop than previously thought. The March reading had shown a decline of 1.5%, but revisions put that at 2.1%. April’s 0.6% reduction has added to the gloom when most analysts had been expecting the sector to hold steady.

However, this is one of the more volatile measures of the economy’s performance and there are always lots of caveats to contend with. The most important adjustment is to isolate transportation—especially airplane manufacturing. A good month for Boeing sends the index into orbit and a bad month tends to drag it down. Without the aircraft industry factored in, the factory orders decline was 1.1%, mostly on reduced auto demand.

The biggest shift took place in defense-related production (-21.5%). This is the part of the current reduction in U.S. commitment in the Middle East that will need to be taken into consideration in the future. Not only is there less need for the equipment manufactured to support the military in these nations but there will soon be millions of former military personnel returning to civilian status and seeking jobs. Add in the reserves and National Guard who will be expecting to resume their old careers, and the unemployment situation worsens.

The US economy can ill afford a major slowdown in the manufacturing sector, as this has been the lone bright spot in the economy for the past couple of years. The most important factor for manufacturing may be related to export activity at this point. The U.S. manufacturer has started to become adept at selling to other markets, and that is a good thing in general. The challenge is that U.S. producers now are subject to the vagaries of those other markets, and there has also been notable decline tied to European struggles.

-Chris Kuehl, PhD, NACM economist

(Note: Kuehl will be a prominent speaker at several events during next week’s 2012 NACM Credit Congress in Grapevine (Greater Dallas), TX. For more information on Kuehl’s session and Credit Congress itself, or to register, visit http://creditcongress.nacm.org. The conference begins on June 10).

Creditworthiness and paying habits along sovereign lines was, as expected, a recurring topic of interest throughout FCIB's Annual International Credit and Risk Management Summit in Hamburg in May. While sources noted the importance of weighing conditions within each region of a country and relationships with existing customers in such places, FCIB delegates still craved information at the national level, and not just about often-discussed problem nations like Greece, Spain and Russia. Based on panelist, speaker and delegate observations, here is a rundown of some of the latest risk and big-picture economic trends to keep in mind for some less-discussed nations:

Argentina and Bolivia: Concern is growing among those who do business in these nations as the threat of confiscation, such as in Venezuela in the recent past, continues to rise. As such, the short-term credit market is rife with risk, and options like credit insurance are in short supply. The key phrase here is "wait and see."

Bangladesh: Emerging as a manufacturing outsourcing destination because of lower wage demands than other production powerhouses such as China and India.

Egypt: Major changes to the banking system are taking place post-revolution. Hence, even timely payments are often subject to delays of a week or more. One panelist noted that Egypt resembles the Turkey, now a sub-BRIC emerging economy of note, of 25 years ago. Granted, the process of change and reaching potential is more likely to come over decades, not months or years.

Hungary: Those doing business here generally do so on open account following a short period of COD-type arrangements, and characterized Hungary as one of the better-paying European nations at present. However, it often takes three to five days for clearing and gaining access to the payment.

Italy: This PIIGS nation fell off media radar somewhat, but is doing a good job of quickly executing reforms. However, its debt burden remains tremendous, and the nation could struggle more if well-publicized problems in Greece or Spain escalate further.

Netherlands: Held up as the example of how a nation can progress from perennial debtor (up to the late 1990s, early 2000s) to creditor over the course of a decade. Few are in better a position financially, save Germany, in the European Union at present.

Nigeria: Continues to be a high-risk market although, because of the oil trade, can be lucrative as well. Financial problems at Pipelines and Products Market Company (PPMC) remain a concern with possible spillover effect. Fuel shortages have been blamed on PPMC woes, and it is estimated the private market has exposure well exceeding $1 billion.

Slovenia and Croatia: Cash-flow problems for companies there have been an issue for years, but that seems to be abating somewhat.

Tunisia: Showing no improvement, payments are continually late or delayed. A wait of a month for banks to make the money available is not out of the question even when payment is made on time.

United Arab Emirates: The UAE actually benefitted from the Arab Spring revolts. Like parts of Turkey, Dubai now has become a bit of a trading center between more Islamic-tied business, including those operating under Sharia Law, and the west.

NACM-National and NACM affiliates from around the nation proudly unveiled a website for the NACM National Trade Credit Report (NTCR) Friday.

The site (http://www.tradecreditreport.com) is designed to educate potential users on the NACM National Trade Credit Report by providing information on various aspects of what is included in the reports, viewable samples, downloadable brochures and links to help find NACM affiliates selling the NTCR, among other features. The NTCR illuminates elements such as credit scores, trade payment data and oft-requested “days beyond terms” statistics among tools drawn from a growing database fed by more than 10,000 businesses and 1,000 trade groups nationwide.

In a 2011 interview about the evolving NTCR, NACM Tampa President Bill Meeker said, "We’re bringing this report out emphasizing the trade. When you get to talk about trade groups, you’re talking about pure industry trade, how they’re paying in their own industry. While it’s important to see other trades, the first need is ‘I want to see how they’re paying in my industry.’”

Demos of the product will be available at the NACM Expo booth at the 2012 Credit Congress in Grapevine (Dallas), TX. For more information on Credit Congress, or to register, visit http://creditcongress.nacm.org/. Additional explanation and analysis of some of NTCR’s “nuts and bolts” is featured in the May issue of Business Credit, which is available online to NACM members at www.nacm.org.

The Obama Administration and campaigners working to ensure a second term for the Democrat have often invoked Mitt Romney’s “Let Detroit Go Bankrupt” headline/soundbyte to hit at the Republican nominee’s presidential campaign. Now, the Romney campaign has rung the bell for Round 2 by turning a bankruptcy headache tied to President Barack Obama into a public counterstrike.

Romney went on the attack this week with allegations of ”crony capitalism” over the failure of Solyndra, a solar energy company with deep ties to the Obama fundraisers now being investigated for fraud and in the midst of a Chapter 11 case filed in September. Solyndra had received more than one-half-billion-dollars in government loan guarantees which, along with its palatial offices, were at the center of Romney’s ire. The Solyndra bankruptcy filing, the FBI raid at its headquarters and ongoing investigations levied a PR hit to the Obama Administration. In the wake of the auto bankruptcy debate Obama and other politicians have used against Romney during campaign season, the GOP candidate is trying to turn the tables with insolvency, similarly, as the centerpiece of the counter-effort.

Romney has been bashed regularly, including by some Obama campaigners, for the self-penned 2008 New York Times headline "Let Detroit Go Bankrupt." Romney criticized Obama for the proposed bailouts of Chrysler and General Motors, which most labeled at least somewhat successful, noting a burden on taxpayers as a key critique. Romney's point was about ways to better manage the bankruptcies to improve business prospects for the long-term health of the companies with no suggestions of liquidations which would have caused millions to lose their jobs. The additional gist of Romney’s later arguments was that the president had acted in some ways on his publicly-offered advice. Still, the headline has stood out in campaign soundbytes over the depth of Romney’s point in the piece, which some argue still wouldn’t have been successful without government financial involvement during the downturn. The issue also was used by Romney’s GOP primary opponents with some success in Ohio and Michigan, though Romney managed to eke out wins in both.

However, that story has taken a significant backseat to Solyndra upon Romney’s newfound focus on the administration embarrassment.

(Update 2: Since this story's original posting, the Stockton City Council voted 6-1 to authorize its city manager to file a petition seeking protection under Chapter 9 of the U.S. Bankruptcy Code).

Just days after an agreement to extended a state-mandated mediation period provided hope that Stockton, CA could avoid a municipal bankruptcy filing, it appears the option of Chapter 9 could be looming…and as early as next week. It’s a bad sign considering the number of debt-hobbled communities and, now, school districts in the state and throughout the country.

Stockton’s City Council has scheduled a June 5 vote to decide whether the community, through its attorneys/representatives, will file for Chapter 9 protection. Just one week ago, its continued negotiations with creditors under the framework of a 2011 California law mandating mediation periods made it seem like the process was working and a potential template for other communities and states. But as the trite adage goes, what a difference a week makes.

The 2011 California law and its mandated mediation aimed to keep struggling municipalities from hastily entering into a Chapter 9. Mayor Ann Johnston said the extended negotiations meant “creditors understand our fiscal circumstances, and they believe that it is worth the investment of time and resources to work toward a solution.” The impending June 5 vote shakes confidence that enough middle ground can be found between the creditors and the community. If eventually filed, Stockton would unseat Jefferson County, AL as the largest municipal bankruptcy filing in U.S. history.

Meanwhile, a new report out of the state last week noted that at least a dozen of California’s public schools serving more than 2.5 million children do not have enough money to operate properly over the next year. Short of tax hikes, strained budgets and continually shrinking tax bases stung by the recession and the real estate crash could lead a line of schools to eye the same option Stockton community leaders clearly appear to be leaning toward in an attempt to gain breathing room from their creditors.

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